ISLAMIC BANKING

WHY ISLAMIC BANKING? HISTORY IN PAKISTAN SERVICES OF IBs

ISLAM A COMPLETE RELIGIONvTeachings about all spheres of life . vRules of ISLAM are also in favor of humanity in this world as well . vSources of Shariah : 1 . Quran 2 . Sunnah 3 . Ijma 4 . Ijtehad / Qiyaas

RULES OF ISLA M CONCERNED WITH OUR ECONOM IC LIFEIt would be very difficult to collect and mention all of them in this brief article . However , some of the basic rules would be worth mentioning . These are : vRiba vGharar

RIBARiba ( Interest ) is a loan with the condition that the borrower will return to the lender more than and better than the quantity borrowed .

Riba is strictly prohibited in Islam . It has two types : 1 . Riba - Al - Dain 2 . Riba - Al - Fadhl

R IBA - AL - DAI NAny excess benefit required or given as the case maybe as consideration in a loan transaction . Due to the prohibition of Riba Al Dain , all of the following types of transactions are not allowed : vInterest - based loans . vDiscounting of receivables . vTrade of debts with profit . vTrade of all interest - based securities .

RIBA - AL - F ADHLAny excess in spot or deferred barter trade of some specific homogeneous commodities ( such as gold , silver , all weighable / measurable things like wheat , petrol or commodities that are used as a medium of exchange like currencies ). Due to the prohibition of this type of Riba , the following transactions are not allowed : vSpot or credit sale of gold with gold in excess . vExchange of currencies of same country in excess , etc .

GhararLiteral meaning of Gharar is the sale of probable items whose existence or characteristics are not certain , due to the risky nature that makes the trade similar to gambling .

vSelling the birds in the sky . vThe fish in the water , etc .

GHARAR PROHIBITED TRANSACTIONSvUncertainty or ambiguity in the transaction . such as the purchase of premiums to vInsurance

insure against v

something that may or may notoccur .

vFuture or forward transaction in which Salev

contract is contingent to a future period , performance of which is uncertain as it is not executed now .

vDerivatives used to hedge against possibleoutcomes . v

Introduction in Pakistan( Cont )vISLAM was the basis of creation of an independent state within the Sub - Continent . vQuaid - e - Azam , in his speech at the occasion of the inauguration of State Bank of Pakistan , had expressed the desire for evolving an Islamic system of banking . vArticle 38 ( f ) of the Constitution of the Islamic Republic of Pakistan provides : The State shall . eliminate Riba as early as possible .

Introduction in Pakistan( Cont )

1960 s

vEfforts to Islamize the economy of Pakistan started . vA bold and comprehensive exercise . vNon - interest based banking was rolled out country - wide . vThe whole exercise was challenged in the Federal Shariat Court . vLater , the decision regarding transformation of the system was set aside in a review petition by the Supreme Court and has been sent to the Federal Shariat Court to start fresh hearings .

Introduction in Pakistan( Cont )

1980 s

vThe efforts and practical steps undertaken in the 1980 s to Islamize the economy at national level are considered as pioneering work in the Muslim world as this became important reference material for other countries which undertook the path towards introduction and establishment of Islamic banking systems . vModel was failed due to : 1 . Recognizes as evolutionary process . 2 . Inflexible for the dynamic market . 3 . No appropriate mechanism to ensure Shariah Compliance . 4 . Stakeholders were not in the favor of this system .

Introduction in Pakistan

2000 s

vThe Chief Executive , in his meeting of 4th September , 2001 , had asked the State Bank to take a lead to establish a full - fledged Islamic bank and allow existing banks to open subsidiaries and separate branches for Islamic banking , instead of a full scale conversion of the financial system . vA separate Islamic Banking Department was established . vAt end of the year 2003 only one bank operated as a full - fledged Islamic bank and three conventional banks were operating Islamic banking branches . Today there are 6 full fledge licensed Islamic banks ( IBs ) and 12 conventional banks have licenses to operate dedicated Islamic banking branches ( IBBs ).

ISLAMIC BANKS IN PAKISTAN

6 Full Fledged Banks

1. 2. 3. 4. 5. 6.

AlBaraka Islamic Bank Bank Islami Pakistan Limited Dawood Islamic Bank Limited Dubai Islamic Bank Pakistan Limited Emirates Global Islamic Bank Limited Meezan Bank Limited ( Cont )

v

ISLAMIC BANKS IN PAKISTAN12 Conventional Banks Offering Islamic Banking 1 ) Askari Bank Limited2 ) Bank Al Habeeb Limited 3 ) Bank Alfalah Limited 4 ) Habib Bank Limited 5 ) Habib Metropolitan Limited 6 ) MCB Bank Limited 7 ) National Bank of Pakistan 8 ) Soneri Bank Limited 9 ) Standard Chartered Limited ( Pakistan ) 1 0 ) The Bank of Khyber 1 1 ) The Royal Bank of Scotland 1 2 ) United Bank Limited 13)

SEGMENTS COVERED BY ISLAMIC BANKS INCLUDEv vCorporate / Commercial . vAgriculture . vConsumer . vCommodity financing . vSME sector . vTreasury and Financial institutions .

ISLAMIC BANKING PRODUCTS & SERVICESvAsset Side

Corporate / Commercial Agricultural Consumer Commodity Financing SME Sector Investment Sector

vLiability Side

Current Accounts Basic Banking Accounts Saving Accounts Term Deposits Certificates of Investment

ISLAMIC BANKING PRODUCTS & SERVICESvOthers

Bonds & Guarantees Letters of Credit Remittances ( local & International ) Online banking ATM / debit card ( including Visa ) Safe deposit lockers Utility bill payments etc .

/

Collection of export bills , assignment of export local bills Inter - Bank funds transfer facility through ATM E - Statement facility Lockers Phone Banking and 24 / 7 Call Centre service . Deposit accepting ATMs

COMPONENTS OF ISLAMIC BANKINGv v vLoans vDeposits vOther Services

MODES OF FINANCING

IJARAHis a form of leasing . It involves a contract where the bank buys and then leases an item to a customer for a specified rental over a specific period . The duration of the lease , as well as the basis for rental , are set and agreed in advance .

Ijarah

IJARAHvUsed for long term financing . vOWNERSHIP remains with the bank . vPOSSESION remains with the customer . vTYPE OF ASSET is durable . vINSURANCE OF THE ASSET is the responsibilityof bank .

vPREDETERMINED RENTAL PAYMENTS . vTERMINATION OF IJARAH is with mutual consent .

TYPES OF IJARAHvIJARAH SALAM

This type of Ijarah does not conclude in the transfer of ownership of the leased assets to the lessee .

vIJARAH WA IQTINA

In ijarah wa iqtinaeither party can make a promise to buy / sell the assets upon expiry of the term of lease . Alternatively , the leaser may make a promise to gift the asset to the lessee upon termination of the lease , provided the lessee has fulfilled all his obligations .

MURABAHAmeans a sale of goods by a bank to its customer under an arrangement whereby the seller ( bank ) is obliged to disclose the cost of goods sold and a margin of profit included in the sale price of goods agreed to be sold . Payment can be made either on deferred payment basis or installment basis .

Murabaha

( Cont )

MURABAHABank = seller TYPES OF ASSET

Customer = buyer

Murabaha may be transacted in both tangible and intangible assets . Murabaha shall not be transacted in respect of any debt instrument including receivables INVOICE OF ASSETS The invoice issued by the supplier will be in the name of the financier as the commodity would be purchased by an agent on behalf of such financier . SECURITY / COLLATERAL The buyer i . e . the customer may be required to furnish security in the form of pledge , hypothecation , lien , mortgage or any other form of encumbrance on asset . However , the mortgagee or the charge - holder shall not derive any financial benefit from such security .

MUSAWAMAHvIt works exactly like murabaha with only one difference in respect of pricing formula . v vUnlike Murabaha , seller ( bank ) in Musawamah is not obliged to reveal his cost . All other conditions relevant to Murabaha are valid for Musawamah as well . v vMusawamah can be used where the seller ( bank ) is not in a position to ascertain precisely the costs of commodities that it is offering to sell . v

TAWARRUQ

Literally means

to liquidate .

Tawarruq is an arrangement in which bank sells a commodity to the client on deferred payment at cost plus profit . The client then sells the commodity to a third party on cash with a purpose of having access to liquidity . Therefore at the end of the transaction , the client ends up with liquidities and a debt against the bank which

TAWARRUQ

SALAMIntroduction Salam is a sale

whereby the seller ( customer ) undertakes to supply some specific goods to the buyer ( bank ) at a future date in exchange of an advanced price fully paid at spot . Here the price is cash , but the supply of the purchased goods is deferred .

SALAM .

RABB - US - SALAM MUSLAM ILAIH RA S - UL - MAL MUSLAM FIH

The buyer ( bank ) is called RABB - US The seller ( customer ) is called The cash price is called RA S - UL The purchased commodity is termed as

MUSLAM ILAIH .

MAL .

MUSLAMFIH .

SALAM OVERVIEW

SALAM

back - to - back contract , namely Parallel Salam , to sell a commodity with the same specification as the purchased commodity under a Salam contract to a party other than the original seller . The Parallel Salam allows the Bank to sell the commodity for future delivery at a predetermined price ( thus hedging the price risk on the original Salam contract ) which is higher than the price of the first salam and protects the Bank from having to take delivery of the commodity and warehousing it .

Parallel salam : The Bank may enter into a

( Cont )

SALAMThe bank cannot sell the commodity back to the customer . It is considered haram in islam .

In order to ensure that the seller shall deliver the commodity on the agreed date , they can also ask him to furnish a security .

SECURITY

CONDITIONS OF SALAMvFull payment of price v vSalam can be affected in those commodities only the quality and quantity of which can be specified exactly . v vThe exact date and place of delivery must be specified in the contract .

ISTISNAis the second kind of sale where a commodity is transacted before it comes into existence . It means to order a manufacturer to manufacture a specific commodity for the purchaser .

ISTISNA

The person who manufactures / sells the commodity is called SANI and the person who orders the commodity is called MUSTASNI and the commodity made MASNU .

ISTISNA

ISTISNAvSupply of material is not the responsibility of the buyer ( mustasni )v

vISTISNA BETWEEN BANK AND CUSTOMER

Customer = Mustasni . Bank = Sani .

v

vPARALLEL ISTISNA ( BETWEEN BANK & MANUFACTURER )vBank = Musatasni vManufacturer = Sani .

( Cont )

ISTISNA

vSECURITY

The title deeds of the ordered commodity , or any other property of the client may be kept by the financier as a security , until the last installment is paid by the client .

P R O C E S S OF IS TIS NA A SAL EvThe process starts when a customer expresses to the bank its intention to purchase a commodity that has to be manufactured , built or assembled with certain specifications at a specified price .v

vThe bank and the customer enter into an Istisna a contract under which the bank undertakes to have the subject commodity manufactured and delivered to the customer within a certain period in return for a specified price payable on spot or on several installments or in one stroke on deferred basis .v

vThe bank then enters into a back - to - back Istisna a contract with a third party to have the subject commodity manufactured , built or assembled .

D I F F E R E N C E BETW EEN IS TIS NA & SAL AMvIn case of salam bank acts as a buyer and in case of istisna bank acts as seller .v

vThe subject of istisna is always a thing which needs manufacturing , while salam can be affected on anything , no matter whether it needs manufacturing or not .v

vIt is necessary for salam that the price is paid in full in advance , while it is not necessary in istisna . ( Cont )

D I F F E R E N C E BETW EEN IS TIS NA & SALA M :vThe contract of salam , once affected , cannot be cancelled unilaterally , while the contract of istisna can be cancelled before the manufacturer starts the work . v vThe time of delivery is an essential part of the sale in salam while it is not necessary in istisna that the time of delivery is fixed . v

DEBT MODESLoans which carry service charges i . e . the cost of operation excluding the cost of funds ( interest ) and provisions for bad and doubtful debts . The maximum service charge permissible to each bank will be determined by the State Bank from time to time .

QARD

Qard e hasna is interest free loan . While the purpose of Qard e Hasna could be charity , help or advance for a certain time period , its repayment by the borrower is obligatory as Quran encourages Muslims to fulfill their promises and commitments . ( Cont )

QARD E HASNA

DEBT MODESTo that extent , guarantees such as mortgage or any other collateral security are allowed . However if the borrower is in trouble it is expected from the lender to extent time or voluntarily remit part or total amount of principle .

SECURITY

In practice , Qard e Hassan is used for short term financing and social welfare .

SHORT TERM FINANCING

PARTICIPATION MODES OTHER MODES

PARTICIPATION MODEv v vMudaraba vMusharaka vDiminishing musharaka

MUDARABAMudarabais an ancient form of financing practised by the Arabs since long before the advent of Islam .

History

A contract whereby one side the investor orRabb ul Malcontributes money and the other side works , being the manager orMudarib . TheRabb ul Malbears all losses , and theMudaribearns a profit share

Definition

v vIn RESTRICTED MUDARABA , the mudarib can do whatever business he wants . v vWhile in UNRESTRICTED MUDARABA , rabb ul mal decides what business the mudaribwill do with his money .

RESTRICTED VS UNRESTRICTED MUDARABA

Two - Tier Mudarabav vThere are two different mudaraba transactions , one with depositors and one with those who it provides financing . v vIn the FIRST TIER mudaraba , bank plays the role of mudarib and the depositors as the rabb ul mal . v vIn the SECOND TIER , bank plays the role of rabb ul mal and the customers as mudarib .

PROFIT AND LOSS SHAREv If the project ends in profit they share the profit in a pre - arranged proportion . If it results in loss the entire loss is borne by the financier , and the entrepreneur gains no benefit out of his effort , which was his part of the investment .

MUSHARAKAvThe literal meaning is sharing and the root in arabic is shirkah . v

vMusharakah ( joint venture ) is an agreement between two or more partners , whereby each partner provides funds to be used in a venture .

PROFIT AND LOSS SHAREvAll partners are entitled to a share in the profits resulting from the project in a ratio which is mutually agreed upon . However , the losses , if any , are to be shared exactly in the proportion of capital proportion

TYPES OF MUSHARAKASHIRKAT - UL - MILK a ) Optional ( Ikhtiari ):

At the option of the parties e . g ., if two or more persons purchase equipment , it will be owned jointly by both of them and the relationship between them with regard to that property is called " Shirkat - ul - Milk Ikhtiari "

b ) Compulsory ( Ghair Ikhtiari ):

This comes into operation automatically without any effort / action taken by the parties . For example , after the death of a person , all his heirs inherit his property , which comes into their joint ownership as a natural consequence of the death of that person .

TYPES OF MUSHARAKASHIRKAT - UL - AQD i ) Shirkat - ul - Amwal ( Partnership in capital )

where all the partners invest some capital into a commercial enterprise . ii ) Shirkat - ul - Aamal ( Partnership in services ) where all the partners jointly undertake to render some services for their customers , and the fee charged from them is distributed among them according to an agreed ratio . iii ) Shirkat - ul - wujooh ( Partnership in goodwill ). The partners have no investment in the business .

RULES OF CAPITAL IN MUSHARAKA

a ) Quantified ( Ma'loom ): Meaning how much etc .

b ) Specified ( Muta'aiyan ): Meaning specified currency etc .

c ) Not necessarily be in liquid form

DIMINISHING MUSHARAKAvDiminishing Musharakah is furtherdefined as " a

partnership between one party and another , tojointly purchase an asset ".

vDiminishing Musharakah is a form ofpartnership , which ends with the complete ownership of a partner who purchasesthe shareof another partner in that project by a redeeming mechanism agreed between both of them . v

D I MI NIS HING MU SHA RAKA H C O U L D TAK E DI FF EREN T SH AP E S I N DIFF ERE NT SUB - CON TRA C T SvPartnershipby ownership between two or more personsv

vLeasing of the shareof one partner in the asset tothe otherpartnerv

vAnd the selling ofthe shareof one partner to the others .

USE OF DIMINISHING MUSHARAKAFinancial institutions can use Diminishing Musharakah for providing house financing , auto financing , plants and machinery financing , factory / building financing and financing of all other fixed assets .

vIn the case of diminishing Musharaka financing , at the end of a financial period the share of the Islamic bank is measured at historical cost less the portion transferred to the partner at fair value . The difference is recognised as profit ( loss ) in the income statement

CALCULATION OF PROFIT & LOSS

vDiminishing Musharaka arrangement in the first stage is that of lessor and lessee and at the later stage is that of seller and buyer .

OTHER MODESv vWakalah vKafalah

WAKALAHvLiteral meaningof othersv

protection on behalf

vIn Islamic financing , a contract in which oneperson appoints another person to act as an agent on their behalf in a transaction is called wakalah .v

vA contract between two parties , i . e . the owner of the capital ( Muwakil ) and the Bank ( Wakil ).v

vThe main features of agency are service , representation and the authority to act for the principal . vThe banks charge a fixed fee for providing the services . v

SERVICES THROUGH WAKALAHvSale and purchase vLetting and hiring vBorrowing and lending vAssignment of debt vPayment and collection of trade bills v

TYPES OF AL - WAKALAHvParticular Wakalah / Special AgencyParticular wakalah is made only for a certain known transaction . For e . g . buying or selling a certain known house or a car .v

vGeneral Wakalahv

It is a general delegation of power . In this case the agent owns all the power which the principal has .

vRestricted Agencyv

Where the agent has to act within certain conditions . For e . g . buy the house at such a price

vAbsolute agency

Where no condition is put for the transaction . For example if the principal assigns an agent to buy a house and he does not specify the price v

TERMINATION OF AN AGENCYvWhen the purpose for which an agency is made no longer exist . vWhen the principal himself performs the transaction for which he has appointed an agent . vWhen the agent withdraws from the agency . vWhen the object for which an agency is made is destroyed . v v

KAFALAHv vLiteral meaning :

a guarantee

It is defined as a contract which combines one s zimmah ( liability ) with another person s zimmah

TYPES OF KAFALAH :it is a guarantee to return an asset to its owner

a ) Kafalahbi mal

vKafalah bi dayn

it is a guarantee for the repayment of another party s loan obligation . vKafalah bi `ayn / kafalah bi taslim it is a guarantee of payment for an item or a guarantee of delivery in a transaction .v v

it is a guarantee to bring someone to a specific authority , such as the judiciary . v

b ) Kafalah bi nafs

TYPES OF DEPOSITS

DEPOSITS

An Islamic bank is a deposit taking financial institution whose scope of activity includes all currently known banking activities , excluding Riba .

CONCEPT OF DEPOSITSv vIt has long been established that deposits ( e . g . with a bank ) become loans as soon as they are used by the recipient of the deposit v vIf deposited item was an amount of money or something which perishes by usage , and if the depositor allows the recipient to use the deposited items , then the contract is considered a loan contract . In loan contracts , any increase , as we have seen , is forbidden Riba . v

TYPES OF DEPOSITSv v vCurrent accounts vSaving accounts vTerm deposits vCertificates of investment

CURRENT ACCOUNTv v vBased on Qard basis vGuaranteed by bank vNo profit vBank cannot use money in non Shariah transactions v

CURRENT ACCOUNTUnderlying Islamic mode Acceptable currency Type of product Minimum balance requirement Minimum tenor Maximum tenor Profit calculation Target customers Service charges Qard PKR current(checking ) NA Checking checking No Businessmen and individuals NA

SAVING AND TERM DEPOSITSv v vbank shares its net earnings with its depositors in a way that depends von the size . vdate - to - maturity of each deposit

SAVING ACCOUNTvPLS ( profit and loss sharing ) accounts vmobilizes funds on the basis of Mudarabah v vProfit calculated on monthly basis vMinimum balance may or may not be required vno minimum and maximum tenor v

SAVING ACCOUNTUnderlying Islamic mode Acceptable currency Type of product Minimum balance requirement Minimum tenor Maximum tenor Profit calculation Target customers Service charges Mudaraba PKR checking NA Checking checking monthly Salaried customers.housewives and individuals NA

TERM DEPOSITSvPreferred modes are modaraba and musharaka vProfit calculated on semi annual or annual basis vMinimum balance required vPreset minimum and maximum tenor v

CERTIFICATES OF INVESTMENTvBased on mudaraba and musharaka basis . v vProfit calculation depends on maturity period and amount of investment .

MEEZAN BANK LIMITED

Types of certificates in Meezan bank Limited

DOLLARS MUDARABA Underlying Islamic mode CERTIFICATEModaraba,GBP TERM ) (,USD FCY Acceptable currency EuroType of product Minimum balance requirement Minimum tenor Maximum tenor Profit calculation Target customers Service charges Term deposit USD 10000 3 months 3 years Monthly Who prefer long term investment in FCY with better returns NA

CERTIFICATE OF ISLAM IC INVESTMEN T Underlying Islamic mode ModarabaAcceptable currency Type of product Minimum balance requirement Minimum tenor Maximum tenor Profit calculation Target customers Service charges PKR Term deposit PKR 50000 3 months 5 years Monthly Who wish to invest from short term to long term NA

Underlying Islamic mode Acceptable currency Type of product Minimum balance requirement Minimum tenor Maximum tenor Profit calculation Target customers Service charges

SPECIAL MUSHARAKA CERTIFICATE

Musharaka PKR Term deposit PKR 50,000,000 No preset tenor As per Maturity On maturity Corporate or financial institutions NA

COMPARISON BETWEEN COMERCIAL AND ISLAMIC BANKS

COMPARIS ON BETWEEN COMERCIAL AND ISLAMIC BA NKS

Conventional Banks

Islamic Banks

vThe functions and operating modes of conventional banks are based on fully manmade principles .

vThe functions and operating modes of Islamic banks are based on the principles of Islamic Shariah .

vvThe investor is assured of a predetermined rate of interest .

vvIn contrast , it promotes risk sharing between provider of capital ( investor ) and the user of funds ( entrepreneur ).

v

(Cont)

v

COMPARIS ON BETWEEN COMERCIAL AND ISLAMIC BA NKS

Conventional Banks

Islamic Banks

v. It aims at maximizing profit without any restriction .

vIt also aims at maximizing profit but subject to Shariah restrictions .

vv. It does not deal with Zakat .

vvIn the modern Islamic banking system , it has become one of the service - oriented functions of the Islamic banks to be a Zakat Collection Centre and they also pay out their Zakat . ( Cont )

COMPARIS ON BETWEEN COMERCIAL AND ISLAMIC BA NKS

Conventional Banks

Islamic Banks

vLending money and getting it back with compounding interest is the fundamental function of the conventional banks .

vParticipation in partnership business is the fundamental function of the Islamic banks . So we have to understand our customer's business very well .v

vIt can charge additional money ( penalty and compounded interest ) in case of defaulters .

vThe Islamic banks have no provision to charge any extra money from the defaulters . Only small amount of compensation and these proceeds is given to charity . Rebates are given for early settlement at the Bank's discretion .

v

COMPARIS ON BETWEEN COMERCIAL AND ISLAMIC BA NKS

Conventional Banks

Islamic Banks

vVery often it results in the bank's own interest becoming prominent . It makes no effort to ensure growth with equity .

vIt gives due importance to the public interest . Its ultimate aim is to ensure growth with equity .

vvFor interest - based commercial banks , borrowing from the money market is relatively easier .

v vvFor the Islamic banks , it must be based on a Shariah approved underlying transaction .v

v

( Cont )

COMPARIS ON BETWEEN COMERCIAL AND ISLAMIC BA NKS

Conventional Banks

Islamic Banks

vSince income from the advances is fixed , it gives little importance to developing expertise in project appraisal and evaluations .

vSince it shares profit and loss , the Islamic banks pay greater attention to developing project appraisal and evaluations .

vvThe conventional banks give greater emphasis on credit worthiness of the clients .

vvThe Islamic banks , on the other hand , give greater emphasis on the viability of the projects .v

v

( Cont )

COMPARIS ON BETWEEN COMERCIAL AND ISLAMIC BA NKS

Conventional Banks

Islamic Banks

vThe status of a conventional bank , in relation to its clients , is that of creditor and debtors .

vThe status of Islamic bank in relation to its clients is that of partners , investors and trader , buyer and seller .

vvA conventional bank has to guarantee all its deposits .

vvIslamic bank can only guarantee deposits for deposit account , which is based on the principle of al wadiah , thus the depositors are guaranteed repayment of their funds , however if the account is based on the mudarabah concept , client have to share in a loss position .

CONCLUSIONIslamic banking assets has reached $450 billion dollar in the Asia Pacific that is roughly 60 % of the entire global industry . With the given growth rate of 10 - 15 % in the last decade , the amount can shoot up to a trillion dollar . Within Asia , Malaysia is seen as the hub of Islamic banking , but some other nations like South Korea , Hong Kong and Singapore are also worthy competitors for these assets . ( Cont )

CONCLUSIONIslamic banking comes with lot of risks as the interpretation of what is allowed and not allowed under the Sharia does not match in every country . They can also be vulnerable to property and the downturns of the equity market . These could have tampered the long - term growth of Islamic finance . Yet the customer base and the simplicity of the process of Islamic banking facilitate the continuous growth of this sector . ( Cont )

CONCLUSIONMore importantly being muslims Islamic rules and regulations have to be considered more than the manmade rules thus in all matters Islamic banking becomes a reliable and favorable method for profit earning .